Undeclared Income and Credibility

Published on July 29, 2016 / Income Loss

If I was working for cash “under the table” before my crash, will it affect my credibility in proving lost income since the crash? Will a judge take my word on what my pre-crash earnings were? How do they decide what’s fair?

When a person is injured in a crash, their injuries can affect their ability to earn income. When determining the amount of those lost earnings we look to the pre crash earnings to establish a pattern. If the injured person had undeclared income, income paid in cash “under the table“, the issue of determining the loss becomes difficult and the plaintiff’s credibility will be called into question. However, even with credibility issues, there are ways to predict income and judges look to what is reasonable in each situation.

In the case of Moini v. Liang (2016 BCSC 702), one of the plaintiff’s sources of income before the crash was that of a taxi driver. He claimed to have been working 12 hour shifts, five or six days each week, earning $5,000 to $6,000 per month. After the crash, his injuries caused him to have neck and back pain that was aggravated when sitting for long periods. He claimed he had to work shorter shifts and therefore, driving a taxi was unprofitable and he had to stop completely. The problem of determining the amount of lost income arose because Mr. Moini declared very little of his actual income and had no receipts to prove his suggested income of between $5,000 to $6,000 per month. In fact, in the years leading up to the crash , Mr. Moini never claimed more than $16,013 in net income.

Mr. Moini’s credibility was called into question due to his “willingness to lie” to the CRA. Due to this credibility issue the judge looked to the report of a vocational expert to determine a more plausible earning potential of $25,000 per year, a far cry from the $60,000 to $72,000 suggested by Mr. Moini. The judge explained his ruling as follows:

[73] Mr. Moini has created difficulty for himself in the prosecution of this case by filing false income tax returns. Failure to report income on tax returns does not preclude an award based on actual income, although it does present the plaintiff with challenges of proof of what the actual income was: Iannone v. Hoogenraad (1992), 66 B.C.L.R. (2d) 106 (C.A.). Mr. Moini filed false returns so as to benefit himself financially. He has the burden of marshalling clear, convincing and cogent evidence of loss. I have the task of scrutinizing the evidence with care. In some cases, a claimant’s word on oath is sufficient to discharge the burden of proof of loss. But when, as here, there is a demonstrated track record over a number of years of a willingness to lie to the tax authorities for financial gain, a claimant like Mr. Moini is hard-pressed to clear the hurdle.

[74] Mr. Moini testified that he earned $5000 to $6000 per month driving taxi. His evidence is that he did not declare his cash revenue. He says that the taxi trip sheets he prepared only had enough cash shown to make the sheet “presentable” because the owner of the taxi would be paid based on the trip sheet. And none of his cash earnings were deposited into banks because, as Mr. Moini conceded in cross-examination, he did not want to leave a trail for the Canada Revenue Agency. In the result, there is no evidence to satisfactorily corroborate Mr. Moini’s bald statements that before the subject motor vehicle accidents he was working long hours and earning $60,000 to $70,000 per year driving taxi.

[75] The report of Ms. Sharma, the vocational expert, quotes a 2013 Service Canada wage report for the Vancouver and Lower Mainland region indicating a median hourly rate of $16.10 for the taxi and limousine driver occupational group. On the basis of a 35 or 40 hour work week, this fits with the evidence in the report of the economist, Mark Szekely, that indicates average employment income of taxi and limousine drivers at about $25,000. I find it to be more likely than not that Mr. Moini was earning more than he was declaring to the income tax authority. I think it likely that if he were earning only what he declared, he would have spent his time working at Flamingo Carpets. However, I am not prepared to accept that Mr. Moini was earning more than the amount the evidence in Mr. Szekely’s report indicates is the average earnings of a taxi driver in Vancouver and the Lower Mainland: $25,000 per year.